States With No Inheritance Tax: What Your Heirs Will Actually Receive

Most Americans assume inheritance taxes died with federal reform. They didn't. Six states still collect inheritance tax in 2026, entirely separate from any estate tax, and the bill goes to your heirs, not your estate.

Inheritance Tax vs. Estate Tax: Two Different Hits

Estate tax is paid by the estate before assets are distributed. Inheritance tax is paid by the person who receives the money. Your heirs can owe one, both, or neither depending entirely on where you lived when you died.

The federal estate tax exemption rose to $15 million per individual in 2026, which shields most families from any federal bill. But state-level taxes operate on completely different thresholds and rules. A $4 million estate owes nothing federally but can still trigger a significant state bill in places like Oregon, Massachusetts, or Kentucky.

For a full breakdown of where estate taxes hit hardest, see our Estate Tax by State: Where Your Heirs Pay Most.

The 6 States That Still Charge Inheritance Tax in 2026

Only six states collect inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Maryland is the only state that imposes both an estate tax and an inheritance tax.

Iowa phased out its inheritance tax over several years, and the phase-out completed fully in 2025. As of late 2025, Iowa inheritance tax is zero across all heir classes.

Kentucky taxes distant relatives and non-relatives at rates up to 16%. Direct descendants, spouses, and parents pay nothing.

Maryland charges inheritance tax at a flat 10% for most heirs, with direct-line relatives exempt. The estate tax kicks in separately on estates above $5 million.

Nebraska taxes distant relatives and strangers to the estate at up to 15%. Immediate family members receive a generous exemption of $100,000 before rates apply.

New Jersey has no inheritance tax for Class A beneficiaries (spouses, children, grandchildren, parents). Class C heirs, including siblings, pay up to 16%. Class D heirs, anyone else, pay up to 16% with a much smaller exemption.

Pennsylvania taxes children and grandchildren at 4.5%, siblings at 12%, and everyone else at 15%. Spouses and parents inheriting from a child under 21 are exempt. Pennsylvania's rate on direct descendants is the most aggressive among all six states for that heir class.

If you are a Pennsylvania resident with children set to inherit a $1 million estate, they owe $45,000 in state inheritance tax alone, before attorney fees or probate costs.

The 44 States Where Heirs Pay No Inheritance Tax

Every other state, including high-tax states like California, New York, and Illinois, collects no inheritance tax. Florida, Texas, Nevada, and Tennessee charge nothing at the state level on either inheritance or estates.

This is a meaningful distinction for retirees relocating to maximize what passes to their heirs. A $2 million estate passing from a Florida parent to adult children generates zero state tax. The same estate in Pennsylvania costs those children $90,000.

If you are comparing retirement destinations with tax efficiency in mind, our Best States for Retirees to Avoid Taxes runs the full numbers.

Gifting as a Strategy: The 2026 Annual Exclusion

The annual federal gift tax exclusion in 2026 is $19,000 per recipient. You can give $19,000 to as many people as you want each year without filing a gift tax return or touching your lifetime exemption.

Can you give your son $500,000? Yes, but any amount above $19,000 in a single year counts against your lifetime federal exemption, which sits at $15 million in 2026. For most families, a $500,000 gift triggers paperwork, not a tax bill. The gift reduces the amount sheltered from your estate at death.

States do not generally impose their own gift taxes, with the exception of Connecticut. Strategic gifting over several years can reduce the taxable estate in states that impose estate taxes, but it does nothing to reduce inheritance tax since that tax is based on what heirs receive regardless of when or how the transfer happens.

Use our tax calculator to model how different gifting strategies affect your estate across states.

Key Takeaways

• Only 6 states collect inheritance tax in 2026: Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania, and Iowa (which completed its phase-out in late 2025). The other 44 states charge nothing.
• Pennsylvania taxes direct descendants at 4.5%, making it the only state where children and grandchildren face a meaningful inheritance tax rate on a standard inheritance.
• The federal estate tax exemption is $15 million per individual in 2026, and the annual gift exclusion is $19,000 per recipient, meaning most American families owe no federal tax at death under current law.

Compare your current state against the zero-inheritance-tax alternatives at liveordiehere.com to see exactly what your heirs keep.